Akal Trade Links v. Assistant Commissioner (ST): Madras High Court draws a line on ‘impossible’ documentation in ITC disputes
1. Why this judgment matters to every GST assessee
For many genuine buyers, GST audits after five or six years have become a nightmare. Officers call for books, invoices, e‑way bills and bank statements, which are usually available on the portal or in digital form, and then go one step further – insisting on lorry receipts, weighment slips and other movement documents for each and every transaction, often covering hundreds of invoices. In many cases, even where the taxpayer produces all primary records and the supplier has paid tax, ITC is denied simply because LR or weighment slips are not on file.
The decision of the Madras High Court in Akal Trade Links v. Assistant Commissioner (ST), Kangeyam Assessment Circle [W.P. No. 20601 of 2023, judgment dated 05.06.2026] directly addresses this kind of hyper‑technical approach. The Court has held that ITC cannot be denied merely because lorry receipts or weighment slips are not produced, when the supplier is registered, has filed returns, paid tax and the invoices themselves carry vehicle details showing transport. This is a very important correction in favour of bona fide taxpayers.
2. Brief facts: a typical real‑world situation
For AY 2018‑19, the petitioner, M/s Akal Trade Links, had purchased goods from a registered supplier named Eco‑friendly Coco Products. Eight invoices were issued between January and August 2018; at that time, the supplier’s GST registration was valid, and only later was it cancelled.
During assessment, the department denied ITC and confirmed tax demand by order dated 28.04.2023, on the ground that the petitioner had failed to produce lorry receipts and weighment slips, and therefore, according to the officer, had not proved actual movement of goods or receipt of supply. Reliance was placed on section 16(2)(b) and section 155 (burden of proof on the ITC claimant).
On the other hand, the petitioner demonstrated that:
The tax invoices contained vehicle numbers through which goods were transported.
The supplier had filed GSTR‑1 and GSTR‑3B and remitted GST for these very supplies.
The supplier’s registration was active at the time of supply; cancellation was subsequent.
Despite this, the assessing authority chose to treat the absence of LR/weighment slips as sufficient to deny the entire ITC.
3. The core legal issue
The core question before the High Court was:
Can ITC be denied solely because the recipient cannot produce LR or weighment slips, when:
supplies are evidenced by tax invoices with vehicle numbers,
the supplier was registered at the time of supply, and
the supplier has filed returns and paid GST on those supplies?
In other words, does section 16 read with section 155 allow the department to convert ancillary transport documents into a make‑or‑break condition, overriding substantive compliance and tax already paid to the Government?
4. Madras High Court’s reasoning in Akal Trade Links
4.1 Primary facts noted by the Court
The Court carefully recorded the following crucial facts:
The eight invoices issued by Eco‑friendly Coco Products between January and August 2018 all contained vehicle numbers.
The supplier was a registered person during the relevant period, and the registration was cancelled only later.
The supplier had filed returns and paid tax on these supplies.
The Court also noted that the petitioner’s stand all along was that it was the supplier who arranged the conveyance for delivery of goods.
4.2 Need for “further examination” – not straight denial
Against this factual backdrop, the Court held that “further examination with regard to whether the supply was genuine was warranted”, especially because returns had been filed and taxes paid by the supplier. Instead, the officer had straightaway confirmed the proposal “merely on the ground that lorry receipts and weighment slips had not been filed”, without undertaking any deeper enquiry into genuineness of supply.
This, according to the Court, was not acceptable. The burden under section 155 may rest with the assessee, but once primary material such as tax invoices with vehicle details and evidence that the supplier has paid tax is on record, the department cannot mechanically deny ITC citing absence of LR/weighment slips alone.
4.3 Substantive compliance vs hyper‑technical objections
The judgment underlines three key principles:
Substantive compliance prevails Where the supplier has discharged tax liability and filed returns, ITC cannot be denied merely because secondary transport documents like LR/weighment slips are missing, especially when invoices carry vehicle details that indicate transport.
Burden of proof is not unlimited Section 155 does not authorise the department to demand every conceivable document indefinitely. If the recipient produces primary documents (invoice, proof of tax payment by supplier, payment through banking channels, vehicle details), the initial burden stands substantially discharged.
Revenue cannot blow hot and cold Once the State has accepted tax from the supplier on these very supplies, it cannot turn around and deny ITC to the recipient without concrete evidence that the supplies are bogus or non‑existent. The absence of LR/weighment slips, by itself, is not such evidence.
4.4 Operative directions
The Court therefore:
Set aside the assessment order dated 28.04.2023.
Remanded the matter for fresh consideration.
Permitted the petitioner to file additional documents within 15 days.
Directed the assessing authority to pass a reasoned order within three months, after providing a personal hearing.
In substance, the Court told the department: you cannot treat non‑production of LR/weighment slips as conclusive; you must properly examine genuineness based on all available material.
5. Why this is a “new shield” for taxpayers
This ruling fits into a wider line of decisions where High Courts have tried to protect bona fide buyers from unrealistic expectations and impossible tests:
Kerala High Court in M. Trade Links v. Union of India treated ITC as a vested right and insisted that procedural changes (like extension of section 16(4) dates) be applied pragmatically.
Kerala High Court in cases like Hercules Automobiles and Champadan Kandiyil Vijeesh refused blanket denial of ITC merely because suppliers were untraceable or had defaulted, and required authorities to re‑examine claims in light of CBIC circulars and actual documentation produced by the buyer.
Several High Courts have held that a genuine buyer who has paid consideration plus GST to a registered supplier through banking channels cannot be made to do the impossible by tracking what the supplier does with that tax afterwards.
Akal Trade Links now adds a specific, practical safeguard: absence of LR or weighment slips by itself is not enough to deny ITC when the core requirements of section 16 are otherwise satisfied and tax has reached the exchequer.
This is particularly important because:
Many businesses, especially small and medium units, do not retain physical LR/weighment slips for five‑plus years.
In many sectors, the transporter or supplier keeps original LR; the buyer only has invoice and proof of delivery.
Officers, relying on Supreme Court observations in the context of movement of goods (for example in certain evasion or transport cases), routinely insist that lorry receipts are indispensable and then extrapolate that into ITC denial, even in the absence of any allegation of bogus billing.
The Madras High Court has signalled that ITC disputes cannot be converted into a documentation trap.
6. Interaction with the Supreme Court line on movement of goods
I rightly point out that in some earlier cases, the Supreme Court has emphasised the relevance of lorry receipts / transport documents in proving movement of goods, and many officers now treat those lines as a rigid checklist for every ITC claim.
The critical distinction is this:
In evasion / clandestine removal cases, the Court was dealing with whether there was any movement of goods at all, often in the context of unaccounted transactions. In such fact patterns, LR and similar documents may indeed be central.
In Akal Trade Links, there is no allegation that the supplier is fictitious, no dispute that the supplier was registered and had filed returns and paid tax for the very supplies in question. Here, the insistence on LR/weighment slips, ignoring invoices with vehicle numbers and supplier tax payment, transforms a reasonable evidentiary expectation into an impossible standard.
The Madras High Court has not discarded the importance of movement documents. It has only said:
You must look at the entire mosaic of evidence – registration status, invoices, vehicle details, supplier returns, payments – and not leap straight to ITC denial merely because a particular piece (LR/weighment slip) is missing.
This is a balanced, fact‑sensitive approach and a useful shield for bona fide buyers facing aggressive reliance on selective Supreme Court dicta.
7. Practical implications for taxpayers and professionals
7.1 How this changes officer–assessee dynamics
After Akal Trade Links, an officer who wants to deny ITC solely on the ground that LR or weighment slips are not on file will find it difficult to sustain that position if:
The supplier was registered at the time of supply.
The invoice is genuine, carries vehicle details and matches with GSTR‑2B.
The supplier has reported the supply in GSTR‑1 and paid tax in GSTR‑3B.
The judgment implicitly reminds the department that:
Section 16(2) conditions are substantive and finite.
Additional paperwork may be relevant for verification, but its absence cannot, by itself, nullify a credit where GST has already been received by the Government.
7.2 Recommended documentation strategy going forward
The TaxGuru commentary on this judgment has already suggested a useful “Minimum ITC Defence File” for each procurement:
Tax invoice with vehicle number mentioned.
GSTR‑2B screenshot of the relevant month showing auto‑population of that invoice.
E‑way bill, where required under rule 138.
Bank payment proof (NEFT/RTGS/cheque) showing payment of value plus GST to the supplier.
If these four pillars are in place, absence of LR or weighment slip should no longer be fatal, particularly when the supplier has filed returns and paid tax. This is the practical takeaway for day‑to‑day GST practice.
For older years, where LR/weighment slips are genuinely unavailable, Akal Trade Links gives a solid basis to argue that:
The assessee has discharged its burden by producing primary records and
The department must either accept the ITC or undertake a serious genuineness enquiry (including verifying supplier’s returns), rather than rushing to disallow credit.
8. Suggested way to plead this judgment in litigation
When you invoke this decision in appeals or writs, it may help to structure the argument as follows:
Facts parallel to Akal Trade Links
Supplier registered and active at time of supply.
Supplies reflected in GSTR‑1 / GSTR‑3B, tax paid.
Tax invoice valid, with vehicle details; payment made through bank.
Unreasonable insistence on LR/weighment slips alone
Show that the entire demand is founded on non‑production of LR/weighment slips (or equivalent).
Point out that no independent investigation has been done to show that the supplier is fake, non‑existent, or that goods were never received.
Reliance on Akal Trade Links
Quote the key reasoning that further examination of genuineness was warranted and that the order “cannot be sustained” when returns and tax payment by the supplier are on record.
Broader line of cases on bona fide buyers
Support with other High Court decisions holding that a genuine purchaser who has paid tax to a registered supplier cannot be penalised for the supplier’s default or for secondary document gaps, unless there is clear evidence of collusion or bogus billing.
This converts a common grievance – “Officer is asking for impossible records” – into a rights‑based, case‑law‑supported challenge.
9. Conclusion: a small but significant re‑balancing in favour of fairness
The ruling in Akal Trade Links v. Assistant Commissioner (ST) is not a licence to ignore documentation. Businesses still need to maintain robust records and a sensible document retention policy. But it is a clear message that ITC disputes cannot be turned into a memory test or a scavenger hunt for every transport chit generated year ago.
By holding that absence of LR/weighment slips, in isolation, cannot justify denial of ITC where the supplier is registered and has paid tax, the Madras High Court has restored some balance to a field that had tilted too far towards hyper‑technical objections and hindsight scrutiny. For genuine taxpayers and professionals, this judgment is a valuable shield: it recognises that GST is a consumption‑based tax, that ITC is central to its design, and that once tax has reached the exchequer, procedural gaps in secondary documents should not be easily weaponised against bona fide buyers.
In practical terms, the decision gives assessees a strong footing to resist arbitrary disallowances, especially in legacy assessments where physical LR/weighment slips have long since disappeared, while primary evidence and actual tax payment remain intact. If consistently followed, Akal Trade Links can help move GST adjudication a step closer to what it was supposed to be: firm but fair, data‑driven but not document‑obsessed, and respectful of genuine trade.
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